On Friday the Treasury Department released a memorandum on the process used by the Financial Stability Oversight Council (FSOC) to designate large systemically significant non-bank financial institutions for heightened supervision. A large non-bank, AIG Insurance, was central to the 2008 financial crisis and received the largest public bailout in U.S. history.

“The Treasury memorandum on systemic risk designation states that the Federal government should not act to ensure systemic risk supervision for large non-bank financial institutions unless that there is evidence that the institution is already at risk of failure. This is a policy of locking the barn door after the horse has gone. The report also implies that entity-level designation is inappropriate in the case of large insurance companies. But larger insurers are complex global financial institutions with proprietary balance sheets rivaling all but the very largest banks. The approach described in the report implies that Federal regulators under this Administration will not live up to their statutory responsibility to put in place an effective supervisory regime for systemically significant non-banks.”